With the introduction of the Goods And Service Tax in India, a lot of new changes have taken place. In as much as there are some few negatives ones, the majority of changes are positive and ideal for many businesses. The introduction of GST can be considered as India’s biggest and best tax reform of all times.
With all the positivity going around the country and excitement, a lot can be expected. Since the introduction of the GST, a new rule came into being that involved getting rated concerning your compliance. The GST compliance rating has been celebrated by many while others are yet to understand its benefits.
In case you are wondering what this GST compliance rating is, here is an answer for you. This is the score that a person registered under GST receives depending on how well they comply with the GST provisions. It is a type of performance ranking that all registered persons will go through.
For one to get the best ranking, they will have to ensure that they comply with every set rule or regulation provided by GST. Everything that pertains to taxes should be in order at all times.
Businesses are awarded a score by the government, and this score is a show of how compliant they are. The lowest rate will typically show the business is not doing well to comply with the stipulated regulations while a higher rating shows that those businesses are complying GST regulations by the book.
How businesses will be rated under GST Compliance Rating
It is crucial that business owners know how they will be rated by the GST rating scheme so that they can know how fair the scheme is. By knowing the factors that determine the rating, you will know exactly what you need to work on so that you can get higher ratings that will give credibility to your business and give it a competitive advantage.
The factors that determine the score you will get include:
Your corporation with the GST authorities:
For the GST system to be excellently implemented, many authorities will be in place to implement certain regulations. Depending on your cooperation, they will be able to rate you as a high scorer or a low one. Give them your maximum cooperation.
How timely you are with your payments:
By being compliant with the GST system, it means that you are entitled to pay your taxes. Even so, how fast you pay your taxes is a critical factor to consider. Delays show that you are not efficient in what you do and this reflects on the image of your business. Maintain a great image by paying your taxes on time.
How timely you are with your reconciliations:
Just as timely as you should be paying your taxes, you should also be fast when it comes to making those reconciliations.
How timely you are with filing your returns:
Filing returns can never be avoided. It is compulsory for every business to file their returns and do it promptly. Failure of which may result in unprecedented events.
Keeping time limits stipulated by GST:
There are other processes that you are supposed to see through within a certain period. Ensure that you carry them out within the given time frame.
Now that you have knowledge on how businesses will be rated, you are in a better position to control your ratings. You can now implement these practices in your business that will earn you a higher rating. This way, you can maintain the ratings to be higher every year thereby showing your excellence in running the business.
As long as you comply to the regular an excellent and timely manner, you can rest be assured that you will enjoy the benefits that come with the rating scheme of GST. Other than that, it is also vital that you understand how the GST compliance rating system will work so as to give the customers the benefits of the new taxation system.
This is how the GST rating system will work
Every business owner registered to the GST system is entitled to a refund. However, there is a requirement. A business can only request a refund if their rating is average and above. Also, depending on the GST rating that you got, it will be directly proportional to the amount of refund you will get. If on a scale of 1-10, you rate was 7, then you will get 70% of the total amount of refund payable.
You know what factors are considered when rating businesses. You also know that to maintain a higher ranking, you need to keep up with all the factors mentioned. Therefore, what you need to ensure is that you get 100% score so that you can claim all the refund payable to you. Do not settle for a little refund or even none at all. This is a great opportunity for you to get some money back. Therefore, utilise it effectively.
How your business can benefit from GST Compliance Rating
Immediate response to your refund requests:
When your rating is higher, you will always get immediate responses, and your refund will be credited to you without delays. This is because your rating shows you are excellent in your dealings.
The higher the rating, the higher the refund:
The amount that will be refunded will depend entirely on you. This means that if you want a full refund, you can get it. Also, if you underperform, there might not be any refund for you. The positive side to this is that you are in total control. Choose wisely what is best for your business. There is nothing difficult in getting your business to rank highly.
It shows a positive business image:
When the rating for your business is higher, it speaks well of your business. A business that is stable and excellent in its dealings will always rank better using the GST compliance rating. When you rank lower, people can know that you are not effective, efficient, dependable, professional, and committed. All this negative publicity will ruin your business image and your business dealings.
More customers will be drawn to you:
Never underestimate the power of a rating scheme regardless of the body that conducts it. People always have more confidence in the businesses that rank highly. It is a sign of competency, and everyone wants to do business with a competent company.
Therefore, getting a higher rating means that more people will be drawn to you and they will want to do business with you. The higher rating will attract the businesses. However, you will have to work harder so as to keep them interested and turn them into loyal clients or partners.
It gives you a competitive advantage:
When you are aiming at a higher rating than other businesses in the same sector, then the ratings will distinguish you from the rest of the businesses in that industry. By being set apart by the ratings, the spotlight will be on you, and thus you will be a competition that no one can ignore.
Safety from external audits by GST team:
When your scores are higher, there is no reason why GST will send their audit teams to audit your business. There is nothing as suspicious as a business that cannot seem to get its house in order. Therefore, for such businesses, the GST authorities will have to come and carry out an audit to ensure there are no issues.
This means that if you have any monkey businesses going on, then you are in big trouble because you will be caught. How about avoiding them completely by ensuring everything is done accordingly?
Disadvantages of GST Compliance Rating
As much as the GST compliance rating is a good thing, it can be a bad thing for many other businesses that are ineffective in their dealings.
First, it can speak negatively about you:
When your rating is low, the image of the business is reduced to what you score. This means that the bad rating will say you are bad for doing business with and won’t attract prospects.
No refund for you:
When your business falls below standards, and the rating is below average, then your refund request will not be granted, and this is the last thing you need.
It can make you lose your customers:
People will refrain from doing business with you if your rating is not speaking positively about you.
It can attract the attention of the GST compliance authority:
When your ratings are terribly low, the GST compliance personnel will have to intervene. This means that you will have GST authorities all over your business. This can be uncomfortable to bear and bad for business.
How to know your GST Compliance Rating
When a business is registered, the person will be issued a GSTIN (Goods and Services Tax Identification Number). This number will help you keep track of your compliance rating. Using this number you can know your rating once the scores are made public on the GST Network (GSTN). All you have to do is to access the portal. Note that since it is public, other people can know your ratings too.
The implementation of GST system has been a blessing in that India was long overdue. With the GST compliance plan in place, it is only in a business’ best interest to be as compliant as possible so that they can reap the benefits. Make a point to tap into the goods that GST has to offer.
How you can maintain good GST rating
Now that you know the advantages of having a good GST rating, you must start taking measures to maintain a good rating. Fortunately, if you use a good GST compliant accounting software like ProfitBooks, half of your work is already done.
With ProfitBooks, you can create GST invoices, track expenses, manage inventory and directly file GST Returns. Best part is, you don’t need to be an accountant to do all this. ProfitBooks is designed for business owners and hence its super simple to use.Try ProfitBooks Free Now